China Telecom to step up 4G and fixed-line broadband coverage across the mainland

China Telecom, which reported solid gains in its first-quarter earnings results on Thursday, plans to step up its 4G and fixed-line broadband coverage across the country, while deepening its foray into new internet-based businesses.

Yang Jie, the newly appointed chairman and chief executive at China Telecom, said in a regulatory filing that the company aimed for “a breakthrough” in areas such as cloud computing, big data, the internet of things and mobile payment.

“The group will firmly seize new opportunities,” said Yang, who officially replaced former company head Chang Xiaobing on Monday.

China Telecom posted a 1.4 per cent increase in net profit to 5.14 billion yuan (HK$6.14 billion) in the first quarter, up from 5.05 billion yuan in the same period last year, which it said was in line with expectations as both mobile and fixed-line businesses saw revenue growth.

Total revenue rose 6.1 per cent to 86.43 billion yuan from 81.45 billion yuan a year ago.

The company added 4.74 million new mobile subscribers during the quarter to reach a total user base of 202.64 million. The number of 4G handset users in its network reached 74.91 million.

“In the first quarter, China Telecom upgraded 12 per cent of their existing 2G and 3G customer base to 4G,” Bernstein senior analyst Chris Lane said in a report. “As China Telecom has continued to steadily add subscribers over the period, it should continue to show faster revenue growth.”

Lane added that China Telecom is expected to share a similar trend with China Unicom in terms of network costs and selling expenses growth.

In January, Unicom and China Telecom agreed to an ambitious cooperation deal that aims to promote structural reforms in China’s telecommunications industry and help advance the government’s “Internet Plus” strategy for broader online access nationwide.

The two operators aim to narrow the 4G network gap with domestic market leader China Mobile and lower their capital spending by sharing costs on new rural 4G network deployments.

China Mobile had 377 million 4G customers at the end of March, while Unicom had 59.3 million in the same period.

Nomura research analyst Huang Leping estimated in a report that China Telecom’s total capital expenditure this year of 98 billion yuan, while Unicom’s is expected to reach 100 billion yuan.

Bernstein’s Lane said he doubted whether “either company has sufficiently improved their 4G network quality to take meaningful share from China Mobile this year”.

“But China Telecom’s growth trajectory continues to be stronger than Unicom’s,” Lane said.

China Telecom plans to add 800,000 4G base stations this year, compared with 680,000 for Unicom.

Shares of China Telecom advanced 0.79 per cent to close at HK$3.85 at the end of trading on Thursday. China Mobile’s shares ended slightly lower, shedding 0.2 per cent to HK$91.45. China Unicom fell 1.5 per cent to end the session at HK$9.24.